Doing Business As: Sole Proprietorship, Partnership, and Corporate DBAs Pros and Cons

A DBA, or Doing Business As, is a type of business where the owner is simply doing business under a new name that is not the owner’s legal name. But there are a few different types of DBAs, and the differences are not always clear. This article discusses the pros and cons of all three DBA types: the sole proprietorship, the partnership, and the corporate DBA.

A sole proprietorship is the simplest type of business out there -- it’s a DBA, or Doing Business As, meaning that it’s simply a name other than your legal name under which you’re doing business.

• Pros: If you’re looking for a fast startup and easy paperwork, it doesn’t get any more basic than a sole proprietorship. The formation documents typically ask only for your name, home address, business name, business address, and business purpose, and you don’t even need an EIN. (You can use one if you like, however, if you’d prefer not to provide your SSN.)
• Cons: Since a sole proprietorship is simply an individual doing business under another name, there is no legal separation between the owner and the business -- the owner is the business. If your business gets in legal trouble, the individual gets in legal trouble. The owner has 100% liability.

An unincorporated partnership is another type of DBA; it’s just like a sole proprietorship, with the obvious exception.

• Pros: Simple formation documents; quick and affordable startup.
• Cons: Both partners share liability -- as well as authority. If partners aren’t seeing eye-to-eye on things like business operations, or if they simply aren’t communicating, things could get messy.

Individuals aren’t the only ones who can form a DBA. A corporation or LLC, too, can decide to do business under a different name from their legal corporate name. Why would a corporation want to use a different name? There are two main reasons:

1. Opening a new location

If you have a bakery called Fifth Street Bakery, Inc., and you open a new location on Marshall Street, you can file a DBA and call your new location Marshall Street Bakery. It's still tied to the corporation, but it more accurately reflects your business.

2. Adding new products or services

If your auto body shop is now offering custom detailing, Twin Cities Auto Body could file a DBA for Twin Cities Custom Detailing.

• Pros: While the corporation is fully liable for a corporate DBA, the individual owners of the corporation are not -- the limited liability enjoyed by individual owners of an incorporated entity extend to that incorporated entity's DBAs.
• Cons: There will be additional paperwork to maintain. Also, if the DBA is operating at a new location, you'll need to either manage both locations or hire new staff. In the case of new staff, you'll be responsible for understanding employee leave law and other issues that come with hiring employees.